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Wednesday, November 11, 2009

Social Network E-commerce Missed Opportunity Or Next Big Thing

It is a bit of an enigma to me that the social networking and e-commerce worlds have completely bi-passed each other. E-commerce was the first real money maker on the web and web 2.0 has simply past it by. Social networking has been a big hit but not in terms of revenue. It is no secret that all of the big social network platforms are big losers when it comes to monetizing their customer base. This is especially true if you look at revenue per social networking participant and the amount of time each participant spends in a social network environment.

The chart below illustrates the gaping hole in the marketing waiting to be filled by an ambitious social network e-commerce play.

On the left we have the consumer and social network factors and on the right we have the merchant and monetization elements. The upper right hand quadrant is virtually empty with no significant players occupying this space.

So why is this a no man's land? Why are social networking and e-commerce companies afraid of this market position? Why has there not been a marriage made in heaven between e-commerce and social networking?

It appears that the e-commerce sites such as Amazon and E-bay are stuck in web 1.0 land because they have been so successful with their web 1.0 static models. This model has worked well for them and they have invested a lot of time and money establishing brand awareness and building infrastructure. Why change when you have a good thing?

On the other hand the social networking sites such as twitter, facebook, bebo, etc. have focused almost exclusively on a revenue-less model. They have built elaborate systems around this model to make sure that their participants feel that the social networking environment is for them and not for their exploitation. They also have build elaborate systems around this model making it difficult for them to move into the money making quadrant.

There are some notable properties such as Yelp, Craigslist and Angies list that do tease you with the prospect of bringing commerce, merchants, consumer and virality together for the perfect storm. However, realistically these sites appear to be satisfied with their peripheral positions. They too seem to be stuck in a zone that does not really create the momentum or revenue required to take advantage of the opportunity.

Overall, the opportunity to effectively combine the viral benefits of social networking with the revenue per consumer of e-commerce seems to be an opportunity too big to ignore. It also seems unlikely that the traditional e-commerce and social networking companies will fill the gap. We will most likely be surprised by the companies that do occupy this space.